Abstract
PurposeThe purpose of this paper is to present the risk of the non-financial sector in Croatia concerning the threats of money laundering through the prism of national and supranational risk assessment. In addition to a brief overview of the financial sector, the specifics of the non-financial sector have been highlighted. This paper aims to emphasize the peculiarities of the non-financial sector, focusing on the consequences of arbitrary application on the right to professional secrecy and independence.Design/methodology/approachSpecifics of the national risk assessment in Croatia have been analyzed using deductive and inductive methods. To provide an overview of the non-financial sector, the risk assessment at the supranational level has been discussed and compared with the national one. Particular attention has been paid to the areas of increased risk.FindingsThe effectiveness of risk assessment depends on several factors such as the characteristic of the sector being observed, the specifics of each profession or business, changes at the level of awareness-raising and efficient and coherent supervision. Most deficiencies were observed in the area of beneficial ownership identification, conducting due diligence, awareness of the risk exposure and permanent education.Originality/valueBy recognizing the risk profile faced by the non-financial sector, this paper seeks to point out their role as “Gatekeepers” that is far from being negligible. By analyzing the risk of money laundering in Croatia, the tendencies of harmonization with international standards are pointed out along with the occurrences indicated by the practice.
Highlights
The risk-based approach is crucial to the effective implementation of the FATF Recommendations
Competent authorities, and obliged entities identify, assess, and understand the scale and impact of the money laundering and terrorist financing risk to which they are exposed
As stated by the European Commission (2017, p. 144), their skills are relevant in the areas of misuse of customer accounts, purchase of real property, creation/management of trusts and companies, undertaking certain litigation, setting up and managing charities, over or underinvoicing or false declaration around import/export goods, providing assurance, and tax compliance. These professionals may be unwittingly involved in the money laundering process, as well as complicit or willfully negligent in conducting their customer due diligence obligations
Summary
The risk-based approach is crucial to the effective implementation of the FATF Recommendations. It assumes that countries, competent authorities, and obliged entities identify, assess, and understand the scale and impact of the money laundering and terrorist financing (hereafter ML/TF) risk to which they are exposed. Following the identified level of risk, they establish the most effective preventive measures to mitigate it. As a result of timely detected and well-understood the national level of risk, country authorities should apply anti-money laundering and terrorist financing measures The full terms of this licence may be seen at http://creativecommons.org/licences/by/4.0/legalcode
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