Anti-Money Laundering and Counter Terrorist Financing

PwC is the market leader in assessing system vulnerabilities with regard to risks associated with money laundering (Anti-Money Laundering - AML) and terrorist financing (Combating Financing Terrorism - CFT), assessing compliance programmes and assisting in improving existing systems and controls. We have developed a comprehensive approach to reducing risk, improving risk management, and implementing operational solutions. We cooperate with you to make sure that compliance controls in the area of anti-​money laundering and terrorist financing are effectively implemented and adequate for quality management of risk and regulatory requirements.

How we can help?

Our team of professionals can help you develop an effective and efficient anti-money laundering and terrorist financing system that will monitor the risks your organization is facing, as well as comply with regulatory expectations and novelties in the area of ​​anti-money laundering and terrorist financing. Our AML experts work closely with you to understand your business and help you create your own control systems in the area of ​​anti-money laundering and terrorist financing, so that you can manage the risks and regulatory requirements effectively.

Our comprehensive risk management framework optimizes your people, processes, technology, management and control functions, including:

Providing assistance in aligning your business with regulatory findings

  • We understand the expectations you are facing when it comes to developing and implementing action plans for addressing the measures defined by regulators. Our experts can help you identify appropriate solutions.

Providing support in the preparation and implementation of an internal audit of the anti-money laundering and terrorist financing system

  • Providing support before conducting an internal audit of the anti-money laundering and terrorist financing system
  • Our team of experts will conduct a mandatory audit of the Anti-Money Laundering and Terrorist Financing Programme (AML audit)

We provide training tailored to each regulated sector

We offer training for employees involved in the anti-money laundering and terrorist financing programme

  • Annual anti-money laundering and terrorist financing courses (PwC's Academy AML seminars) Specialized workshops
  • Special workshops for Management, internal auditors and persons authorized for anti-money laundering and combating the financing of terrorism
  • E-learning
  • Customised training

We can help you anticipate and reduce the risk of non-compliance in the area of ​​anti-money laundering and terrorist financing

  • Regulatory compliance and competent authority recommendations
  • Preparation of anti-money laundering and terrorist financing programmes and internal policies based on risk assessment
  • Testing the adequacy of the existing anti-money laundering and terrorist financing system
  • Testing the efficiency of the existing system

We can help you monitor and optimize the existing system

  • Optimization of the existing anti-money laundering and terrorist financing system
  • Technological support and application solutions

Directive (EU) 2015/849 of the European Parliament and of the Council on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing, the so-called Fourth Anti-Money Laundering Directive (4 AMLD)

On 25 June 2015, Directive (EU) 2015/849 of the European Parliament and of the Council of 20 May 2015 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing, amending Regulation (EU) No 648/2012 of the European Parliament and of the Council, and repealing Directive 2005/60/EC of the European Parliament and of the Council and Commission Directive 2006/70/EC (4th AML Directive) became effective.

The 4th AML Directive becomes effective together with the revised Regulation (EU) 2015/847 on information accompanying transfers of funds.

The Directive was transposed into Croatian law on 1 January 2018, when the new Anti-Money Launing and Terrorist Financing Act became effective (Official Gazette No. 108/2017).

 

What’s new

  • money laundering and terrorist financing risk assessment – risk-based approach
  • beneficial ownership transparency by establishing a Beneficial Ownership Register
  • national and supra-national ML/FT risk assessment
  • extension of the definition of politically exposed persons to include both domestic and foreign politically exposed persons
  • exemptions from the application of due diligence measures specific to electronic money

 

Directive (EU) 2018/843 of the European Parliament and of the Council amending Directive (EU) 2015/849 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing, the so-called Fifth Anti-Money Laundering Directive (5 AMLD)

Obliged entities are required to align their AML and CTF business operations with the new Act on the Prevention of Money Laundering and Terrorist Financing and related by-laws.

In view of frequent terrorist attacks and the Panama Papers leak, on 30 May 2018, the European Parliament and the Council adopted the new 5 AML Directive, which was published in the Official Journal of the EU on 19 June 2018. Member States are required to align their national legislation by 10 January 2020.

The aim of these amendments is to strengthen the measures in order to better counter the financing of terrorism and to ensure increased transparency of financial transactions.

 

The new rules include:

  • preventing risks associated with the anonymous use of virtual currencies for terrorist financing and limiting the use of prepaid cards
  • introducing new obliged entities: virtual currency exchange platforms and providers of electronic wallets for virtual currencies
  • enhancing/increasing transparency of beneficial ownership by improving the accuracy of beneficial ownership registers
  • strengthening the monitoring of financial transactions with high-risk third countries
  • enhancing the powers of EU Financial Intelligence Units and their access to information, including centralised bank account registers
  • ensuring centralised national bank and payment account registers or central data retrieval systems in all Member States (Unified Accounts Registry).

Directive (EU) 2018/1673 of the European Parliament and of the Council on combating money laundering by criminal law, the so-called Sixth Anti-Money Laundering Directive (6 AMLD)

On 23 October 2018, the European Parliament and the Council adopted a new anti-money laundering directive, which was published in the Official Journal of the EU on 12 November 2018. This directive introduces new criminal law provisions, which will disrupt and block access by criminals to financial resources, including those used for terrorist activities.

The new rules include:

  • establishing minimum rules on the definition of criminal offences and sanctions relating to money laundering. Money laundering activities will be punishable by a maximum term of imprisonment of at least 4 years, and judges may impose additional sanctions and measures (e.g. temporary or permanent exclusion from access to public funding, fines, etc.). Aggravating circumstances will apply to cases linked to criminal organisations or for offences conducted in the exercise of certain professional activities;
  • the possibility of holding legal entities liable for certain money laundering activities which can face a range of sanctions (e.g. exclusion from public aid, placement under judicial supervision, judicial winding-up, etc.);
  • removing obstacles to cross-border judicial and police cooperation by setting common provisions to improve investigations. For cross-border cases, the new rules clarify which Member State has jurisdiction, and how those Member States involved cooperate, as well as how to involve Eurojust.

Amendments

4 AML Directive

(Anti-Money Laundering and Terrorist Financing Act – Official Gazette No. 108/2017)

5 AML Directive

(Amendments to the Anti-Money Laundering and Terrorist Financing Act)

Obliged entities
  • Credit institutions
  • Financial institutions
  • Auditors external accountants and tax advisors
  • Notaries and legal professionals
  • Providers of gambling services
  • Electronic money institutions, etc. 
  • Providers engaged in exchange services between virtual currencies and fiat currencies
  • Custodian wallet providers
  • Estate agents, including when acting as intermediaries in the letting of immovable property, etc.
Risk assessment and risk-based approach

The 4 AML Directive lays down a list of factors and risk variables which the obliged entities need to consider when assessing risks, in particular when providing for low and high-risk situations, or the appropriate application of enhanced or simplified due diligence measures.

European Supervisory Authorities (EBA, ESMA and EIOPA) have issued Guidelines on risk assessment and the application of due diligence measures. HNB and HANFA have issued by-laws implementing these Guidelines.

 

The money laundering and terrorist financing risk analysis must include an assessment of the measures, actions and procedures undertaken by the obliged entity to prevent and detect money laundering and terrorist financing

The Directive sets out new risk factors with regard to products, services, transactions or delivery channels that may indicate a potentially higher risk: transactions related to oil, arms, precious metals, tobacco products, cultural artefacts and other items of archaeological, historical, cultural and religious importance, or of rare scientific value, as well as ivory and protected species.

Supranational and national risk assessment

In addition to the stated internal risk assessment that the obliged entities must implement, the Directive provides for two more risk assessments: an EU level and Member State level risk assessment.

The Republic of Croatia has developed a National Money Laundering and Terrorist Financing Risk Assessment, while a Supranational Risk Assessment has been developed at the EU level. When assessing the ML/TF risk exposure, the obliged entity must also consider the results of the said risk assessments.

 
Beneficial owner - TRUST

In addition to the due diligence measures, in the process of identifying and verifying the identity of the beneficial owner of a trust and an equivalent entity subject to foreign law, the obliged entities are also required to identify and verify the identity of the settlor, trustee(s), the protector, if any, the beneficiaries or class of beneficiaries of the trust assets administered, provided that future beneficiaries have already been determined or have yet to be determined and other natural persons directly or indirectly exercising ultimate control over the trust or an equivalent entity subject to foreign law.

 

The requirement to collect information on all persons connected to a trust or similar legal arrangements.

The requirement to identify and verify the identity of the beneficial owner in cases when one of the persons related to a trust or other legal arrangement is a legal entity has been specified in more detail

Improving Beneficial Ownership Transparency by establishing Beneficial Ownership Registers

One of the requirements under the Directive aims at improving beneficial ownership transparency, with the Directive laying down the obligation to establish a Beneficial Ownership Register. The competent authorities and obliged entities as well as any person demonstrating their legitimate interest will be granted access to the information contained therein.

 

Information from the Register is only available to the following authorised persons:

1. authorised officials of the Office

2. authorised persons of public law and other bodies referred to in Article 120 of the Act

3. the obliged entity’s authorised person and the deputy of the authorised person as well as other employees of the obliged entity referred to in Article 9 of the Act, and the persons referred to in Article 68, paragraph 4 of the Act when implementing the customer due diligence measures under the Act and

4. domestic or foreign natural persons and legal entities in accordance with the provisions of the Act.

Domestic or foreign natural persons and legal entities may access the information on the beneficial owner of a particular legal entity registered in the Register in the manner provided for by the Ordinance

 

Requirements with regard to the obligation to enter the information on the beneficial owners of trusts into the Beneficial Ownership Register have been specified in more detail.

Reporting discrepancies between the beneficial ownership information available to the obliged entity or a government body and the information contained in the Beneficial Ownership Register.

Linking the Beneficial Ownership Register with the beneficial ownership registers from Member States

Enhanced customer due diligence – non-face-to-face customer identification The obligation to conduct an enhanced due diligence is implemented, inter alia, in cases where a customer is not physically present at the obliged entity when establishing and verifying identity while performing the due diligence Non-face-to-face customer identification deleted 
Politically exposed persons

Determining whether a party, the legal representative, proxy or the beneficial owner of a party is a politically exposed person.

Determining whether a party or the beneficial owner of a party is a politically exposed person – legal representative and proxy DELETED.

 

Wider scope

For legal entities and natural persons performing their registered activity, the threshold has been lowered from HRK 105,000 to HRK 75,000.

 

The Directive applies to all natural persons, regardless of whether they are foreign or domestic politically exposed persons, immediate family members or close associates. Pursuant to the new Act, the list of politically exposed persons has been extended to now include another category: mayors, county prefects and their deputies in the Republic of Croatia.

 
Due diligence exemptions for electronic money Under the Directive, obliged entities may be allowed not to apply the due diligence measures with respect to electronic money. However, this measure is limited to payment instruments which are not reloadable (EUR 250) and to which mitigating measures such as monitoring of transactions can be applied. Lowering the threshold for exemptions to due diligence application measures with respect to electronic money from EUR 250.00 to EUR 150.00
High-risk third countries

In order to establish a common approach to high-risk third countries that do not apply the appropriate ML/TF prevention measures, the European Commission is now specifically authorised to identify those countries.

 

Consequently, the European Commission has adopted the COMMISSION DELEGATED REGULATION (EU) 2016/1675 of 14 July 2016 supplementing Directive (EU) 2015/849 of the European Parliament and of the Council by identifying high-risk third countries with strategic deficiencies

Amendments to Enhanced customer due diligence measures applicable to customers from high-risk third countries
Enhanced due diligence measures with regard to bearer shares   With regard to the implementation of the enhanced due diligence measures where the party is a legal entity issuing bearer shares or a natural person or legal entity carrying out a transaction involving bearer shares, the obligations of the obliged entities have been specified in more detail.
Central contact point The Croatian National Bank has been designated as the competent regulatory authority authorised to require electronic money and payment service providers with registered offices in another Member State and operating on the territory of the Republic of Croatia through a distributor or agent to appoint a central contact point, taking into account the requirements of the regulatory technical standard adopted by the European Commission. Article 3 paragraph 1 of the Commission Delegated Regulation (EU) 2018/1108 provides for the establishment of a central contact point and lays down the activities of the central contact point, including reporting suspicious transactions to the Office.
Duties and responsibilities of the obliged entity’s management board  For the purpose of establishing and implementing an effective and efficient anti-money laundering and terrorist financing system, the obliged entity’s management board is required, inter alia, to adopt policies, controls and procedures. In addition to policies, controls and procedures, the management board of the obliged entity is required to adopt a risk analysis.
More rigorous sanctions  In relation to the previous Act on the Prevention of Money Laundering and Terrorist Financing, fines for violating the provisions of the Act have been considerably increased. Legal entities may be fined up to HRK 1,000,000.00 or 10% of the total annual income, while fines for responsible persons of a legal entity range from HRK 3,000.00 to HRK 35,000.00.  

Obliged entities

Obliged entities

 

4 AML Directive

(Anti-Money Laundering and Terrorist Financing Act – Official Gazette No. 108/2017)

5 AML Directive

(Amendments to the Anti-Money Laundering and Terrorist Financing Act)

Credit institutions

 

Financial institutions

 

 

Auditors, external accountants and tax advisors

 

 

Notaries and legal professionals

 

 

Providers of gambling services

 

 

Electronic money institutions, etc.

 


  • Providers engaged in exchange services between virtual currencies and fiat currencies
  • Custodian wallet providers

  • Estate agents, including when acting as intermediaries in the letting of immovable property, etc.

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Risk assessment and risk-based approach

Risk assessment and risk-based approach

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Supranational and national risk assessment

Supranational and national risk assessment

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Beneficial owner - TRUST

Beneficial owner - TRUST

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Improving Beneficial Ownership Transparency by establishing Beneficial Ownership Registers

Improving Beneficial Ownership Transparency by establishing Beneficial Ownership Registers

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Enhanced customer due diligence – non-face-to-face customer identification

Enhanced customer due diligence – non-face-to-face customer identification

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Politically exposed persons

Politically exposed persons

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Wider scope

Wider scope

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Due diligence exemptions for electronic money

Due diligence exemptions for electronic money

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High-risk third countries

High-risk third countries

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Enhanced due diligence measures with regard to bearer shares

Enhanced due diligence measures with regard to bearer shares

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Central contact point

Central contact point

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Duties and responsibilities of the obliged entity’s management board

Duties and responsibilities of the obliged entity’s management board 

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More rigorous sanctions

More rigorous sanctions

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Contact us

Katarina Pranjic

Risk & Compliance Manager, PwC Croatia

Per Sundbye

Partner, SEE Forensic Leader, PwC Slovenia

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