FATF Status

Croatia is on the FATF List of Countries that have been identified as having strategic AML deficiencies

Latest FATF Statement  -  23 February 2024

Since June 2023, when Croatia made a high-level political commitment to work with the FATF and MONEYVAL to strengthen the effectiveness of its AML/CFT regime, Croatia has taken steps towards improving its AML/CFT regime, including by completing its national risk assessment. Croatia should continue to work on implementing its action plan to address its strategic deficiencies, including by: (1) Increasing FIU human resources and improving analytical capabilities; (2) Continuing to improve law enforcement authorities (LEAs) detection, investigation and prosecution of different types of ML, including ML involving a foreign predicate offences and the misuse of legal persons; (3) Demonstrating a sustained increase in the application of provisional measures in securing direct/indirect proceeds, as well as foreign proceeds subject to confiscation; (4) Demonstrating the ability to systematically detect and where relevant investigate TF in line with its risk profile; (5) Establishing a national framework for the implementation of UN TFS measures and providing guidance and conducting outreach and training to the reporting entities; and (6) Identifying the subset of NPOs most vulnerable to TF abuse and providing targeted outreach to NPOs and to the donor community on potential vulnerabilities of NPOs to TF abuse.

Compliance with FATF Recommendations

The last Mutual Evaluation Report relating to the implementation of anti-money laundering and counter-terrorist financing standards in Croatia was undertaken in December 2021. According to that Evaluation, Croatia was deemed Compliant for 4 and Largely Compliant for 17 of the FATF 40 Recommendations. It remains Highly effective for 0 and Substantially Effective for 1 of the Effectiveness  & Technical Compliance ratings.

US Department of State Money Laundering assessment (INCSR)

Croatia was deemed a ‘Monitored’ Jurisdiction by the US Department of State 2016 International Narcotics Control Strategy Report (INCSR). Key Findings from the report are as follows: -

Croatia is not an offshore financial center. Although an EU member country, Croatia has not joined the Eurozone.  Croatian authorities consider most money laundering in the country to be of domestic origin, involving the proceeds of illegal domestic narcotics sales and economic crimes, including corruption, fraud, and tax evasion.  Although Croatia is part of a transit route for drugs entering Europe, there is little evidence these networks have utilized Croatia’s financial system. Money laundering occurs primarily through non-resident accounts, transfers to offshore banks using counterfeit documents, and deposits in foreign currency accounts; it also has been linked to the real estate market and the purchase of luxury automobiles. Public corruption has been linked to money laundering, and several investigations are active. Financial crimes investigations in Croatia are often linked to abuse of power and embezzlement, particularly from state-owned enterprises.

There is not a significant black market in Croatia. Management of Croatia’s ports has improved through the EU accession process, and further upgrades are anticipated as Croatia prepares to join the Schengen region. The Export Border Security Office continues to tighten controls and screening to prevent smuggling.

Rating                                                                           (100-Good / 0-Bad)

Transparency International Corruption Index                           50

World Governance Indicator – Control of Corruption             60

Corruption, political patronage and inefficient bureaucracy are among the challenges companies may face when doing business in Croatia. Corruption and bribery are especially prevalent in politics, public procurement, and the building and construction sector. In the course of Croatia's EU accession in 2013, the past few years have witnessed a major anti-corruption crackdown with several high-profile arrests. The primary legal framework regulating corruption and bribery is contained in the Criminal Code and the Corporate Criminal Liability Act, which make individuals and companies criminally liable for corrupt practices including active and passive bribery, money laundering and abuse of functions. Facilitation payments are prohibited, and gifts may be considered illegal depending on their value or intent. Companies report that gifts in the form of drinks or food are common bribes and occasionally help to get things done. For further information - GAN Integrity Business Anti-Corruption Portal

Croatia will celebrate 10 years of European Union membership in July 2023, which has enhanced its economic stability and provided new opportunities for trade and investment. As of January 1, 2023, Croatia is a fully integrated member of the European Union, having adopted the euro as its currency and entered the Schengen zone. In addition to its EU membership, characteristics that make Croatia an attractive destination for foreign investment include a geostrategic location with diverse topography and temperate climate, well-developed infrastructure, and a well-educated multilingual workforce. Historically, the most promising sectors for investment in Croatia have been tourism, telecommunications, and pharmaceuticals and healthcare, but investment opportunities are growing in Croatia’s robust IT and clean energy sectors, with the government announcing plans to add more than 2500 MW of solar, wind, and geothermal energy to the grid by 2030. Croatia also offers visas for so-called “digital nomads” to work in Croatia for up to one year without having to pay local taxes.

The Croatian economy achieved better-than-expected 6.3 percent GDP growth in 2022, double the growth rate of the EU.  The tourism sector, which accounts for as much as 20 percent of GDP, brought in €13.1 billion in revenue in 2022, exceeding the record-breaking 2019 season by almost 24 percent. Largely due to Russia’s aggression against Ukraine and the resulting energy crisis, average inflation in 2022 reached 10.2 percent. To help both businesses and households cope with increased costs of energy and food, the government implemented two economic relief packages consisting of subsidies and price caps totaling $4.5 billion and covering the period from October 1, 2022, to September 30, 2023. Unemployment in January 2023 was at 6.5 percent. The European Commission estimates the Croatian economy will grow 1.8 percent in 2023 and 1.9 percent in 2024, with inflation predicted to drop to 6.9 percent in 2023 and 1.6 percent in 2024.

Croatia will receive nearly $30 billion in EU funding through 2030, including approximately $5.4 billion through the EU’s Recovery and Resilience Facility (RRF), which has the potential to provide a significant boost to the economy if the government directs the funds to productive activities that stimulate job creation and economic growth. The government intends to spend approximately 40 percent of RRF funds in support of climate-related and clean energy objectives, including initiatives to improve energy efficiency in public and private buildings, accelerate development of renewable sources of energy, modernize the electricity distribution and transmission grid to facilitate the integration of renewable energy sources, and promote greater investments in geothermal energy. OECD membership is one of the Croatian government’s top foreign policy priorities, and Croatia is hoping to complete its accession process by 2025.

The Croatian government has taken positive steps to improve the business climate, including working on judicial reform, which investors have historically cited as one of the greatest barriers to investment. The economy remains burdened by underperforming state-owned enterprises, low regulatory transparency, and permit approval delays that impede project development, particularly in the energy sector. The COVID-19 pandemic accelerated digitalization efforts, which has helped decrease excessive bureaucratic procedures for both citizens and companies. Government reforms also seek to liberalize the services market, diversify capital markets, and improve access to alternative financing, and reform tax incentives for research and development. Croatia’s labor laws provide strong protections to workers and there are no risks to doing business responsibly in terms of labor laws and human rights. The government is willing to meet at senior levels with interested investors and to assist in resolving problems.

Country Links

Croatian National Bank

Anti-Money Laundering Office - FIU Croatia (AMLO)

Croatian Company Directory - Biznet