Effective mechanisms must be put in place in the Croatian banking system to prevent money laundering, and any omissions in that regard will not be tolerated, Croatian National Bank (HNB) Governor Boris Vujcic said on Tuesday.
Vujcic was speaking at a press conference after the central bank said earlier in the day that the Financial Inspectorate had fined Zagrebacka Banka (ZABA) HRK 33 million (€4.4m) for failing to meet its obligations under the Money Laundering and Terrorist Financing Prevention Act between 1 January 2017 and 8 November 2019.
Zagrebacka Banka has agreed to pay the fine, thus admitting omissions in the oversight of money laundering and terrorist financing prevention, Vujcic said, adding that the bank had undertaken to fulfil 75 measures ordered by the HNB to improve its money laundering prevention system.
He added that ZABA had recently notified the HNB that it had fulfilled all 75 measures, which the central bank will verify by an inspection.
“This is a message that effective mechanisms must be put in place to prevent money laundering and terrorist financing in the Croatian banking system and that the HNB will not tolerate any omissions in that regard,” the central bank governor said.
Asked if ZABA could be held criminally responsible for this, Vujcic said he could not say and that such questions should be addressed to the competent authorities.
Responding to a reporter’s remark about the alleged involvement of a group of Italian and Croatian citizens in this case, Vujcic said he could not discuss the names of the individuals concerned.
“It is true that this is about something called the ‘Italian typology’ in the prevention of money laundering, which is well known, and about other omissions which should be considered suspicious transactions,” Vujcic said.
The Italian typology means transferring funds into accounts held by non-residents without a clear economic basis and withdrawing funds from such accounts, he explained.
Asked whether it was the transactions by Croatian nationals that were questionable, Vujcic said that it was transactions by “both domestic and foreign residents.”
Vujcic noted that the omissions made by the bank did not involve money laundering but that the bank failed to undertake additional activities and carry out in-depth analyses of such transactions.
“Whether there was money laundering or not is not established by the bank or the HNB but by relevant institutions,” the HNB governor said.
Vujcic said that the HNB exercises oversight over all banks and once the inspections have been finalised the public will be duly informed of their results. He noted that the HRK 33 million fine imposed on Zagrebacka Banka is a single fine for different offences and the largest one ever imposed for such activities.
HNB established 11 violations
The HNB established 11 violations of the Money Laundering and Terrorist Financing Prevention Act.
ZABA did not intensify due diligence of 72 clients; it did not analyse the background and purpose of 1,126 transactions identified as complex and unusual, without an evident economic or legal purpose; for 2,028 transactions it did not use guidelines for establishing suspicion of money laundering or terrorist financing; it did not report 1,122 suspicious transactions to the Anti-Money Laundering Office; and it did not establish an efficient internal control system to reduce and effectively manage money laundering and terrorist financing risks.
This is the highest fine against a credit institution in Croatia to date, not just in the prevention of money laundering and terrorist financing, but in all fields in which credit institutions are held accountable, the HNB said.
It noted that as a supervisory body, it had notified ZABA, in line with the Misdemeanour Act, about its right to the possibility to reach an agreement, which ZABA exercised, admitting its guilt and agreeing to pay the fine.
The amount of the fine is proportionate to the number and gravity of the violations established, the HNB said, adding that in line with the law, it had informed the Anti-Money Laundering Office as well as all relevant state institutions.
Suspicion that ZABA did not comply with the anti-money laundering law arose after Management Board chairman Miljenko Zivaljic resigned on January 20. Although the bank said he was resigning for personal reasons, the media reported that Croatia’s largest bank was under suspicion of having enabled a large number of its clients to launder money.
On February 24, Management Board members Eugen Paic Karega and Nikolaus Maximilian Linaric resigned as well.
ZABA’s assets total HRK 124.9 billion and it holds 27.8% of the Croatian market.
This morning ZABA said it had accepted the HNB’s proposal to reach an agreement under which ZABA must pay a HRK 33 million fine.
The Finance Ministry’s Financial Inspectorate accepted the agreement, of which ZABA was notified yesterday, the bank said.
It added that payment within 30 days of the Financial Inspectorate’s decision resulted in a payment of HRK 22 million and that this was stated in the bank’s financial statements on September 30.
Under the Misdemeanour Act, a fine is considered fully paid if the guilty party pays two-thirds of the fine within the deadline set in the decision on the fine.
(€1 = HRK 7.57)
