Law on the Prevention of Money Laundering and Financing of Terrorism (Official Consolidated Text)

Croatian Agency for Supervision of Financial Services, 10000 Zagreb, Franje Račkoga 6, P.O. Box 164, Croatia t: 01 6173 200, f: 01 4811 507, e: info@hanfa.hr, OIB: 49376181407, MB: 02016419, w: www.hanfa.hr

LAW
ON THE PREVENTION OF MONEY LAUNDERING AND FINANCING OF TERRORISM (Official Consolidated Text, Narodne novine, No. 108/17, 39/19 and 151/22)

CHAPTER I.
INTRODUCTORY PROVISIONS

Subject of the Law
Article 1.
(1) This Law prescribes measures, actions, and procedures that obligors and competent state authorities undertake to prevent and detect money laundering and financing of terrorism, as well as other preventive measures aimed at preventing the use of the financial system for money laundering and financing of terrorism. (2) The provisions of this Law relating to the prevention and detection of money laundering shall apply mutatis mutandis to the prevention and detection of financing of terrorism, with the aim of preventing and detecting the activities of individuals, legal entities, groups, and organizations in connection with the financing of terrorism.

Alignment of Regulations with the Legal Order of the European Union
Article 2.
(1) This Law transposes into Croatian legislation the following acts of the European Union:

1. 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 purpose of money laundering and 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 (Text with EEA relevance) (OJ L 141, 5.6.2015.) (hereinafter: Directive (EU) 2015/849)
2. Directive (EU) 2018/843 of the European Parliament and of the Council of 30 May 2018 amending Directive (EU) 2015/849 on the prevention of the use of the financial system for the purpose of money laundering or terrorist financing, and amending Directives 2009/138/EC and 2013/36/EU (Text with EEA relevance) (OJ L 156, 19.6.2018.) (hereinafter: Directive (EU) 2018/843).
   (2) This Law ensures the implementation of:
3. Regulation (EU) 2015/847 of the European Parliament and of the Council of 20 May 2015 on information accompanying transfers of funds and repealing Regulation (EC) No 1781/2006 (Text with EEA relevance) (OJ L 141, 5.6.2015.) (hereinafter: Regulation (EU) 2015/847)
4. Regulation (EC) No 1889/2005 of the European Parliament and of the Council of 26 October 2005 on controls of cash entering into or leaving the Community (Text with EEA relevance) (OJ L 309, 25.11.2005.) (hereinafter: Regulation (EU) 1889/2005)
5. Commission Delegated Regulation (EU) 2018/1108 of 7 May 2018 supplementing Directive (EU) 2015/849 of the European Parliament and of the Council with regulatory technical standards on criteria for designating central contact points for issuers of electronic money and payment service providers and rules on their functions (Text with EEA relevance) (hereinafter: Commission Delegated Regulation (EU) 2018/1108).

Fundamental Concepts of Money Laundering and Financing of Terrorism
Article 3. (NN 151/22)
(1) Money laundering is considered to be:

1. the conversion or transfer of property, knowing that such property is derived from criminal activity or participation in such activity, for the purpose of concealing or disguising the illegal origin of the property or of assisting any person involved in the commission of such activity to evade the legal consequences of their actions;
2. the concealment or disguise of the true nature, source, location, disposition, movement, rights with respect to, or ownership of, property, knowing that such property is derived from criminal activity or participation in such activity;
3. the acquisition, possession, or use of property if, at the time of receipt, it is known that such property is derived from criminal activity or participation in such activity; or
4. participation in the commission, association to commit, attempt to commit, and aiding and abetting, inciting, facilitating, and counselling the commission of any of the activities listed in points 1, 2, and 3 of this paragraph.
   (2) Money laundering is also considered to occur when the activities by which the property subject to money laundering was created were carried out on the territory of another Member State or a third country.
   (3) Financing of terrorism is considered to be:
5. the provision or collection of funds, or the attempt to provide or collect funds, whether lawful or unlawful, by any means, directly or indirectly, with the intention that they should be used, or with knowledge that they will be used, in whole or in part, by terrorists or terrorist organizations for any purpose, including the commission of a terrorist criminal offense, or by persons who finance terrorism;
6. financing travel for the purpose of committing or contributing to the commission of a terrorist criminal offense or the commission of a criminal offense of training for terrorism and terrorist association.
   (4) A terrorist criminal offense is a criminal offense prescribed by Article 2 of the International Convention for the Suppression of the Financing of Terrorism ("Narodne novine – International Treaties", No. 16/03) and the criminal offense of terrorism and criminal offenses related to terrorism prescribed in the Chapter of the Criminal Code that prescribes criminal offenses against humanity and human dignity. (5) A terrorist is a natural person who:
7. commits or attempts to commit a terrorist criminal offense using any means, directly or indirectly, unlawfully and wilfully;
8. participates in the commission of a terrorist criminal offense;
9. organizes or directs others to commit a terrorist criminal offense;
10. intentionally contributes to the commission of one or more terrorist criminal offenses by an individual or a group of persons acting with a common purpose: with the aim of furthering the criminal activity or criminal interests of the individual or group, in which case such activity or interest includes the commission of a terrorist criminal offense, or with knowledge of the intention of the individual or group to commit a terrorist criminal offense.
    (6) A terrorist group or organization refers to all groups of terrorists who:
11. commit or attempt to commit a terrorist criminal offense by any means, directly or indirectly, unlawfully and wilfully;
12. participate as accomplices in terrorist criminal offenses;
13. organize or direct others to commit terrorist criminal offenses;
14. contribute to the commission of terrorist criminal offenses by an individual or a group of persons acting with a common purpose when the contribution is given intentionally and with the aim of furthering the terrorist criminal offense or with knowledge of the intention of the individual or group to commit a terrorist criminal offense.
    (7) The fundamental concepts prescribed by this Article are prescribed exclusively for the purposes of implementing measures, actions, and procedures for the prevention of money laundering and financing of terrorism carried out by obligors from Article 9, paragraphs 2, 3, 4, and 5 of this Law.

Meaning of Certain Terms
Article 4. (NN 151/22)
Certain terms in this Law have the following meanings:

1. stock exchange and regulated market are terms that have the same meaning as in the law governing the capital market;
2. Customs Administration is the Ministry of Finance, Customs Administration;
3. Member State is a Member State of the European Union or a State signatory to the Agreement on the European Economic Area;
4. electronic money has the same meaning as in the law governing electronic money;
5. European Supervisory Authorities are the European Banking Authority (EBA), established by Regulation (EU) No 1093/2010 of the European Parliament and of the Council of 24 November 2010 establishing a European Supervisory Authority (European Banking Authority), amending Decision No 716/2009/EU and repealing Commission Decision 2009/78/EC; the European Insurance and Occupational Pensions Authority (EIOPA), established by Regulation (EU) No 1094/2010 of the European Parliament and of the Council of 24 November 2010 establishing a European Supervisory Authority (European Insurance and Occupational Pensions Authority), amending Decision No 716/2009/EU and repealing Commission Decision 2009/79/EC; and the European Securities and Markets Authority (ESMA), established by Regulation (EU) No 1095/2010 of the European Parliament and of the Council of 24 November 2010 establishing a European Supervisory Authority (European Securities and Markets Authority), amending Decision No 716/2009/EU and repealing Commission Decision 2009/77/EC;
6. fictitious bank is a credit or financial institution or an institution carrying out activities equivalent to those of credit or financial institutions, which is not physically present in the State or area where it is established, nor has real management or administration, and is not a member of a regulated financial group subject to effective consolidated supervision;
7. financial institution is a term used for obligors from Article 9, paragraph 2, points 2, 3, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, and 17 a), b), c), d), and e) of this Law, and their branches, regardless of whether their head office is in the European Union or in a third country;
8. Financial Inspectorate is the Ministry of Finance, Financial Inspectorate of the Republic of Croatia;
9. Financial Intelligence Unit (FIU) is:
   a) domestic Financial Intelligence Unit is the Office for the Prevention of Money Laundering (hereinafter: the Office); b) foreign Financial Intelligence Unit is the central authority for receiving and analyzing suspicious transactions and other information suspected of money laundering and financing of terrorism and for transmitting the results of the analysis to competent authorities in a Member State or third country (hereinafter: foreign FIU);
10. FIU.net is a secure decentralized computer network for the international exchange of information and data between Financial Intelligence Units of Member States;
11. cash from Article 121 of this Law has the same meaning as in Regulation (EC) No 1889/2005;
12. cash means banknotes and coins that are in circulation as legal tender;
13. cash transaction is any transaction in which the obligor physically receives cash from a party or physically hands over cash to a party for possession and disposal;
14. group means a group of companies consisting of a parent company, subsidiaries, and companies in which the parent company or subsidiary participates, as well as companies that are interconnected as prescribed by the law governing commercial companies and the law governing the accounting of entrepreneurs;
15. identification number is the personal identification number of the obligor of the personal identification number determined by the law governing the personal identification number (hereinafter: OIB), or another identification number for persons who are not subject to the OIB;
16. property is property of any kind, whether tangible or intangible, movable or immovable, material or immaterial, and legal documents or instruments in any form, including electronic or digital, which prove ownership of property or a share in property of that kind;
17. information on the activity of a party who is a natural person is any data that serves as the basis for establishing and monitoring a business relationship, regardless of whether it concerns the private or professional status or activity of the party;
18. distribution channel is a channel used for the delivery of products and services to the end user;
19. correspondent relationship is considered:
    a) when one bank as a "correspondent" provides banking services to another bank as a "respondent", including account management and services related to account management such as cash management, international money transfers, check clearing, clearing accounts, and foreign exchange services; b) relationships between and within credit institutions and financial institutions, including when similar services are provided via the correspondent institution to the respondent institution, and including relationships established for securities transactions or money transfers;
20. credit institution is a term used for obligors from Article 9, paragraph 2, point 1 of this Law, and has the same meaning as in Article 4, paragraph 1, point 1 of Regulation (EU) No 575/2013 of the European Parliament and of the Council of 26 June 2013 on prudential requirements for credit institutions and investment firms and amending Regulation (EU) No 648/2012, including its branches as defined in Article 4, paragraph 1, point 17 of that Regulation, located in the European Union, regardless of whether its head office is in the European Union or in a third country;
21. criminal activity is any participation in the commission of a criminal offense, prescribed by the Criminal Code and other laws prescribing criminal offenses, including tax criminal offenses related to direct and indirect taxes;
22. qualified certificate:
    a) for electronic signature is a certificate for electronic signatures issued by a qualified trust service provider and meeting the requirements set out in Annex I to Regulation (EU) No 910/2014; b) for electronic seal is a certificate for electronic seals issued by a qualified trust service provider and meeting the requirements set out in Annex III to Regulation (EU) No 910/2014;
23. Inter-institutional Working Group for the Prevention of Money Laundering and Financing of Terrorism is an expert working group composed of representatives of state authorities and institutions competent for the prevention and detection of money laundering and financing of terrorism, which is responsible for coordinating and implementing joint policies and activities in achieving strategic and operational objectives in the field of prevention and detection of money laundering and financing of terrorism;
24. National Risk Assessment is a comprehensive process of identifying and analyzing the main risks of money laundering and financing of terrorism at the national level;
25. Transnational Risk Assessment is an assessment of risks of money laundering and financing of terrorism affecting the internal market and related to cross-border activities, conducted by the European Commission;
26. non-profit organizations are associations, foundations, funds, religious communities, and other legal entities that do not carry out economic activity with the aim of making a profit;
27. obligors are legal and natural persons who are obliged to take measures and actions to prevent and detect money laundering and financing of terrorism in accordance with this Law;
28. person carrying out a professional activity is a legal or natural person acting within the framework of their professional activity, namely: lawyer, law firm, notary public, audit firm, independent auditor, tax advisory firm, tax advisor, external accountant who is a natural or legal person carrying out accounting services;
29. authorized person and their deputy are persons appointed by the obligor who are authorized and responsible for implementing measures and actions undertaken to prevent and detect money laundering and financing of terrorism prescribed by this Law and by subordinate acts adopted on the basis of it;
30. Tax Administration is the Ministry of Finance, Tax Administration;
31. business relationship is:
    a) a business, professional, or commercial relationship connected with the professional activities of the obligor for which it is expected, at the time of establishment, to have an element of permanence, which includes opening an account with the obligor; b) a relationship in which the obligor is required to establish a commercial company or trust for their party, regardless of whether the establishment of the commercial company or trust is the only transaction carried out for that party; c) registration and/or identification of players in accordance with regulations governing the organization of games of chance and in accordance with this Law;
32. occasional transaction is a transaction that is not carried out within the framework of an established business relationship;
33. predicate criminal offense is any criminal offense by which illegal income is obtained that can be the subject of the criminal offense of money laundering;
34. FATF Recommendations are international standards on the prevention of money laundering and financing of terrorism issued by the Financial Action Task Force (FATF), which is an intergovernmental body established with the task of setting standards and promoting the effective implementation of legal, regulatory, and operational measures for the prevention of money laundering and financing of terrorism at the international level;
35. transfer of funds has the same meaning as defined in Article 3, point 9 of Regulation (EU) 2015/847;
36. provider of services related to trusts or companies is any person who, in accordance with their business, provides third parties with any of the following services:
    a) establishing commercial companies or other legal entities; b) acting as or appointing another person to act as a director or secretary of a commercial company, partner in a partnership, or similar position in relation to other legal entities; c) providing registered office, business address, correspondence address, or administrative address services and other related services to a commercial company, partnership, or other legal entity or legal arrangement; d) acting as or appointing another person to act as a trustee of a trust established by express declaration (express trust) or similar legal arrangement; e) acting as or appointing another person to act as a nominal shareholder on behalf of another person, unless it concerns a commercial company listed on a regulated market subject to disclosure obligations in accordance with European Union law or equivalent international standards;
37. reasonable measures are appropriate measures taken by obligors that are proportionate to the risks of money laundering and financing of terrorism;
38. Register of Beneficial Owners is the central electronic database of beneficial owners of legal entities from Article 32, paragraph 1, point a) of this Law established on the territory of the Republic of Croatia and trusts and entities equivalent to them of foreign law from Article 32, paragraph 1, point b) of this Law (hereinafter: Register);
39. official personal document is any public document with a photograph of the person issued by the competent domestic or foreign state authority for the purpose of identifying the person;
40. funds are property and financial assets and benefits of any kind, including virtual assets, economic resources (including oil and other natural resources), and including:
    a) cash, checks, monetary claims, promissory notes, money orders, and other means of payment; b) invested funds with obligors; c) financial instruments determined by the law governing the capital market which are traded by public or private offer, including shares and stakes, certificates, debt instruments, bonds, guarantees, and derivative financial instruments; d) other documents proving rights to financial assets or other financial sources; e) interest, dividends, and other income from funds; f) claims, loans, and letters of credit;
41. party is a person or trust from point 59 of this Article who establishes or already has an established business relationship with an obligor or carries out an occasional transaction, including the trustee and the person carrying out equivalent functions in another similar form of foreign law;
42. beneficial owner of a party is any natural person(s) who is the ultimate owner of the party or controls the party or otherwise manages it, and/or the natural person(s) on whose behalf a transaction is conducted, including the natural person(s) who exercise ultimate effective control over a legal entity or legal arrangement;
43. transaction is any receipt, payment, transfer from account to account, exchange, storage, disposal, and other handling of money or other property with an obligor;
44. third country is a State that is not a Member State of the European Union or a signatory to the Agreement on the European Economic Area;
45. game of chance service is a service that includes receiving payments in games of chance, including those with an element of skill, such as lottery games, slot machine games, casino games, and betting games played at a physical location or remotely via the internet, telephone, or other interactive communication devices through which a player can play the game independently, interacting with the system;
46. identification and verification of the identity of a party is the process of collecting data and information about the party and verifying them using documents, data, and information obtained from a reliable and independent source;
47. senior management of an obligor means an employee of the obligor with sufficient knowledge of the institution's exposure to money laundering and financing of terrorism risks and appropriate level to make decisions affecting its risk exposure, and who does not need to be a member of the board or other management body of the obligor in all cases;
48. virtual asset is a digital representation of value or rights which may be digitally traded or transferred and can be used for payment or investment purposes, whereby virtual asset does not include:
    a) financial instruments as defined by the law governing the capital market; b) electronic money as defined by the law governing payment transactions; c) deposits as defined by the law governing the business of credit institutions; d) structured deposits as defined in the law governing the capital market; e) securitization as defined in the law ensuring the implementation of Regulation (EU) 2017/2402 laying down a general framework for securitization and establishing a specific framework for simple, transparent, and standardized securitization; f) life or non-life insurance products; g) pension products; h) virtual assets that are unique and not interchangeable with other digital representations;
49. virtual currency is a subcategory of virtual assets and represents a digital representation of value that is not issued and guaranteed by a central bank or public authority, is not necessarily attached to a legally established currency, has no legal status of currency or money, but is accepted by natural or legal persons as a means of exchange and can be transferred, stored, and traded electronically;
50. custody and management of virtual assets on behalf of third parties is the keeping or control, on behalf of third parties, of virtual assets or means of access to such virtual assets, as appropriate, in the form of private cryptographic keys;
51. management of a virtual asset trading platform is the management of one or more multilateral systems that bring together or facilitate the bringing together of multiple third-party interests in the purchase and sale of virtual assets, within the system and in accordance with its non-discretionary rules, in a way that results in the conclusion of contracts regarding virtual assets, either by exchanging one virtual asset for another or by exchanging virtual assets for fiat currency that is legal tender;
52. exchange of virtual assets for fiat currency is the conclusion of a contract for the purchase or sale of virtual assets with third parties for fiat currency that is legal tender using proprietary capital;
53. exchange of virtual assets for other virtual assets is the conclusion of a contract for the purchase or sale of virtual assets with third parties in exchange for other virtual assets using proprietary capital;
54. execution of orders for virtual assets on behalf of third parties is the conclusion of a contract for the purchase or sale of one...