Thursday, January 19, 2012


On Sunday, the voters in the Republic of Croatia will cast their ballots, in a national referendum, on membership in the European Union. It is believed that there will be sufficient "yes" votes to form a majority, meaning that, after approval of member countries, Croatia will join the EU on 1 July, 2013.

Why is this of interest to compliance officers at international banks ?

(1) History teaches us that money launderers and financial criminals regard EU new membership as a target of opportunity. The new member generally has poor and ineffective AML laws and enforcement, making it a prime candidate for placement of criminal proceeds.

(2) Illicit funds, once placed and invested in the new member, are often allowed to remain. The new investments then often appreciate, as the businesses and assets owned increase in value with the expanding economy. This is a typical middle, not short-term, money laundering strategy.

(3) When the country ultimately joins the Eurozone, a few years in the future, adopting the common currency, the cycle is complete. Profits can now be taken as Euros, and any chance that their illicit origin will be discovered is near zero.

Therefore, should you see any large wire transfers to financial institutions in Croatia, after Sunday's election, institute Enhanced Due Diligence on the sender, including all its officers and principals if a business entity. Scratch below the surface, and you may find that there is a Source of Funds issue; check it out.

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