The Croatian Act on Preventing Anti-money Laundering (AML) and Financing Terrorism (Official Gazette 108/2017) (the AML act), which transposed the Fourth EU AML Directive, prescribes measures, actions and procedures regarding the prevention of money laundering and financing terrorism.(1)
Following the introduction of the Fifth EU AML Directive (for further details please see "Virtual currencies – EU legal overview"), public consultations for the new bill on Preventing AML and Financing Terrorism (the proposed AML act) were held. The proposed AML act entered the parliamentary procedure in December 2018. The first reading of the bill was concluded on 25 January 2019 and the second reading has been initiated in mid-March 2019.
The current AML act does not include virtual currencies or crypto-assets as subject matter and thus they are unregulated. The proposed AML act, in line with the Financial Action Task Force's recommendations, introduces virtual currencies and virtual assets to Croatian law and regulates them in the context of AML provisions. Pursuant to Article 3 of the proposed AML act:
Virtual asset means a digital representations of value that can be digitally traded or transferred and can be used for payment or investment purposes, which was not issued by a central bank or other public authority and which is not necessarily attached to a legally established currency and does not possess a legal status of currency or money.
Virtual currency means a digital representation of value that is not issued or guaranteed by a central bank or a public authority, is not necessarily attached to a legally established currency and does not possess a legal status of currency or money, but is accepted by natural or legal persons as a means of exchange and which can be transferred, stored and traded electronically.
In addition, virtual assets are explicitly considered as assets pursuant to Article 3 of the proposed AML act.
Thus, for a crypto-asset to fall under the definition of 'virtual asset', it must:
- be a digital representation of value;
- be digitally tradeable or transferrable;
- be able to be used for payment or investment purposes;
- not be issued by a central bank or other public authority;
- not be necessarily attached to a legally established currency; and
- not possess a legal status of currency or money.
Therefore, it seems that crypto-assets (eg, virtual currencies, investment and securities tokens) may fall under the proposed AML act's scope.
Further, under the proposed AML act, legal and natural persons providing exchange services for virtual and fiduciary currencies or providing wallet custodial service will likely be considered as AML obligors. These persons should notify the Croatian Financial Services Supervisory Agency of their status by 31 January 2020 (at the latest).
In conclusion, the current Croatian AML act does not regulate crypto-assets. However, the proposed AML act intends to regulate crypto-assets and require legal and natural persons providing exchange services for virtual and fiduciary currencies or providing wallet custodial service to comply with the proposed AML act. In addition, it seems that under the proposed AML act, all transactions undertaken with crypto-assets which fall under the foregoing definitions (virtual currencies, investment and security tokens) will be considered as assets and therefore the entities dealing with crypto-asset transaction must also comply with the proposed AML provisions.
For further information on this topic please contact Željka Rostaš Blažekovic at Porobija & Porobija by telephone (+385 1 4693 999) or email (firstname.lastname@example.org). The Porobija & Porobija website can be accessed at www.porobija.hr.
(1) This article is part of a series that examines digital currencies and the relevant legislation. For other articles in the series, please see "Virtual currencies – EU legal overview".
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