11.02.2020.

This Ordinance deals exclusively with reputational risk arising from the circumstances and facts related to the client that has arisen or might arise as a result of client's characteristics and/or behaviour before and during the establishment, origin or duration of HBOR's business relationship with client.
 

1. DefiniTION OF CLIENT

Client is defined by this Ordinance as a natural person or a legal entity to which HBOR is exposed to a reputational risk when establishing a business relationship. In case when  the client is a natural person, for the purposes of this Ordinance, the legal representative and the proxy holder of the client are deemed to be clients. In case when the client is a legal entity, for the purposes of this Ordinance, the owner, members of the management board or other responsible persons that are responsible for business operations in the legal entity, members of the client’s supervisory board and client’s holders of general power of attorney (“prokuristi”) are deemed to be clients. For the purposes of this Ordinance, all persons that have unlimited liability for obligations assumed in the business relationship are also deemed to be clients.

2. BUSINESS RELATIONSHIP

For the purposes of this Ordinance, business relationship means all lending activities, direct and indirect, guarantees or counter-guarantees, as well as all business relationships related to export credit insurance.

3. RISK CATEGORIES:

a) Above-average high risk, b) High risk, c) Increased risk.  

4. ABOVE-AVERAGE HIGH RISK

A client poses an above-average high risk if: a) bankruptcy proceedings have been initiated against him/her/it, he/she/it is insolvent or over-indebted or in liquidation proceedings, if his/her/its assets are managed by a bankruptcy trustee or court, if pre-bankruptcy proceedings are under way or if he/she/it has suspended his/her/its business activities, unless at the time of occurrence of all the stated circumstances the client already has a business relationship with HBOR; b) he/she/it has been convicted by a final judgement of the following criminal offences set forth in the Criminal Code (Official Gazette of the Republic of Croatia Nos. 125/11,144/12, 56/15, 61/15 and 101/17, 118/18, 126/19 and 84/21) or of the following criminal offences set forth in the Criminal Code (Official Gazette of the Republic of Croatia Nos. 110/97, 27/98, 50/00, 129/00, 51/01, 111/03, 190/03, 105/04, 84/05, 71/06, 110/07, 152/08, 57/11, 77/11 and 143/12):

1. participation in a criminal organisation, pursuant to Article 328 (Criminal Association) and Article 329 (Committing a Criminal Offence as a Member of a Criminal Association) of the Criminal Code (Official Gazette of the Republic of Croatia Nos. 125/11, 144/12, 56/15, 61/15, 101/17, 118/18, 126/19 and 84/21), Article 333 (Associating for the Purpose of Committing Criminal Offences) of the Criminal Code (Official Gazette of the Republic of Croatia Nos. 110/97, 27/98, 50/00, 129/00, 51/01, 111/03, 190/03, 105/04, 84/05, 71/06, 110/07, 152/08, 57/11, 77/11 and 143/12);
2. terrorism or criminal offences related to terrorist activities, pursuant to Article 97 (Terrorism), Article 99 (Public Provocation to Commit a Terrorist Offence), Article 100 (Recruitment for Terrorism), Article 101 (Training for Terrorism), Article 101.a (Travelling for the Purpose of Terrorism) and Article 102 (Terrorist Association) of the Criminal Code (Official Gazette of the Republic of Croatia Nos. 125/11, 144/12, 56/15, 61/15, 101/17, 118/18, 126/19 and 84/21), Article 169 (Terrorism), Article 169.a (Public Provocation to Commit a Terrorist Offence) and Article 169.b (Recruitment and Training for Terrorism) of the Criminal Code (Official Gazette of the Republic of Croatia Nos. 110/97, 27/98, 50/00, 129/00, 51/01, 111/03, 190/03, 105/04, 84/05, 71/06, 110/07, 152/08., 57/11, 77/11 and 143/12);
3. criminal offences against labour relations and social security, pursuant to Article 131 (Violation of the Right to Work), Article 132 (Non-Payment of Salary), Article 133 (Workplace Harassment), Article 134 (Violation of Social Security Rights) and Article 135 (Illegal Employment) of the Criminal Code (Official Gazette of the Republic of Croatia Nos. 110/97, 27/98, 50/00, 129/00, 51/01, 111/03, 190/03, 105/04, 84/05, 71/06, 110/07, 152/08, 57/11, 77/11 and 143/12);
4. money laundering or terrorist financing, pursuant to Article 98 (Terrorist Financing) and Article 265 (Money Laundering) of the Criminal Code (Official Gazette of the Republic of Croatia Nos. 125/11, 144/12, 56/15, 61/15, 101/17, 118/18,126/19 and 84/21), Article 279 (Money Laundering) of the Criminal Code (Official Gazette of the Republic of Croatia Nos. 110/97, 27/98, 50/00, 129/00, 51/01, 111/03, 190/03, 105/04, 84/05, 71/06, 110/07, 152/08, 57/11, 77/11 and 143/12);
5. child labour or other forms of trafficking in human beings, pursuant to Article 106 (Trafficking in Human Beings) of the Criminal Code (Official Gazette of the Republic of Croatia Nos. 125/11, 144/12, 56/15, 61/15, 101/17, 118/18,126/19 and 84/21), Article 175 (Trafficking in Human Beings and Slavery) of the Criminal Code (Official Gazette of the Republic of Croatia Nos. 110/97, 27/98, 50/00, 129/00, 51/01, 111/03, 190/03, 105/04, 84/05, 71/06, 110/07, 152/08, 57/11, 77/11 and 143/12);
6. corruption, pursuant to Article 252 (Receiving Bribes in Business Dealings), Article 253 (Giving Bribes in Business Dealings), Article 254 (Misuse of Public Procurement Procedures), Article 291 (Abuse of Office and Official Authority), Article 292 (Unlawful Favouritism), Article 293 (Accepting Bribes), Article 294 (Giving Bribes), Article 295 (Trading in Influence) and Article 296 (Giving Bribes for Trading in Influence) of the Criminal Code (Official Gazette of the Republic of Croatia Nos. 125/11, 144/12, 56/15, 61/15, 101/17, 118/18,126/19 and 84/21), Article 294.a (Receiving Bribes in Business Dealings), Article 294.b (Giving Bribes in Business Dealings), Article 337 (Abuse of Office and Official Authority), Article 338 (Abuse in Performing Governmental Duties), Article 343 (Illegal Intercession), Article 347 (Accepting Bribes) and Article 348 (Giving Bribes) of the Criminal Code (Official Gazette of the Republic of Croatia Nos. 110/97, 27/98, 50/00, 129/00, 51/01, 111/03, 190/03, 105/04, 84/05, 71/06, 110/07, 152/08, 57/11, 77/11 and 143/12);
7. fraud, pursuant to Article 236 (Fraud), Article 247 (Fraud in Business Dealings), Article 256 (Tax or Customs Duty Evasion) and Article 258 (Subsidy Fraud) of the Criminal Code (Official Gazette of the Republic of Croatia Nos. 125/11, 144/12, 56/15, 61/15, 101/17, 118/18,126/19 and 84/21), Article 224 (Fraud), Article 293 (Business Fraud) and Article 286 (Tax or Customs Duty Evasion) of the Criminal Code (Official Gazette of the Republic of Croatia Nos. 110/97, 27/98, 50/00, 129/00, 51/01, 111/03, 190/03, 105/04, 84/05, 71/06, 110/07, 152/08, 57/11, 77/11 and 143/12);
8. criminal offences against intellectual property pursuant to Article 284, (Infringement of Authors' and Performers' Personal Rights), Article 285 (Copyright Infringement), Article 286 (Copyright-Related Rights Infringement), Article 287 (Patent Infringement), Article 288 (Trademark Infringement), Article 289 (False Designation of Origin) and Article 290 (Public Announcement of Judgement) of the Criminal Code (Official Gazette of the Republic of Croatia Nos. 110/97, 27/98, 50/00, 129/00, 51/01, 111/03, 190/03, 105/04, 84/05, 71/06, 110/07, 152/08, 57/11, 77/11 and 143/12).

c) Client has been found guilty of a serious breach of duty by a final judgement or final decision of the body in charge for violation of applicable laws or other regulations or ethical norms of the profession to which he/she/it belongs, d) Client has been issued a decision of the Croatian Competition Agency referred to in Article 9 of the Competition Act establishing the existence of a prohibited agreement referred to in Article 8, paragraphs 1 and 4 of the Competition Act and Article 101 of the Treaty on the Functioning of the European Union, e) Client has substantially misrepresented the information (in loan application, Statement on Eligibility of Client, etc.), deliberately or due to gross negligence, that are necessary in order to falsely show that there is no basis for application of provisions of this Article, f) During the establishment of a previous or existing business relationship with HBOR, in the fulfilment of his/her/its contractual obligations, the client caused by his/her/its actions, deliberately or due to gross negligence, premature termination of a legal obligation or application of contractual penalties or other contractual sanctions or, significant irregularities have been identified in his/her/its conduct in fulfilling contractual obligations through subsequent checks or audits. Client poses an above-average high risk if he/she/it has been convicted by a final judgement of the criminal offences set forth in the Criminal Code (Official Gazette of the Republic of Croatia Nos. 110/97, 27/98, 50/2000, 129/2000, 51/01, 111/03, 190/03 - Decision of the Constitutional Court, 105/04, 84/05, 71/06, 110/07, 152/08 and 57/11) that are in legal continuity with the criminal offences referred to in previous paragraph of this Article, or, in case of a foreign person convicted by a final judgement for the criminal offences that in terms of their description and consequences correspond to the stated criminal offences.  

5. HIGH RISK

Client poses a high risk if an investigation has been initiated against him/her/it, i.e. if criminal proceedings are conducted for criminal offences described for above-average high risk. If an investigation has been initiated against him/her/it, i.e. if criminal proceedings are being conducted or if he/she/it has been convicted or convicted by a final judgement of criminal offences not stated above, and resulting in a negative public perception and high reputational risk for HBOR.  Also, client poses a high risk if a negative public perception has been established based on suspicions that there is a conflict of interest due to the use of political influence for a personal benefit, including the proceedings before the Commission for Deciding on Conflict of Interest, and especially in cases of repeated imposition of sanctions for violation of the Act on Prevention of Conflicts of Interest. Client poses a high risk if he/she/it has shown incorrect, unprofessional and similar conduct towards HBOR in his/her/its previous or current business relationship with HBOR, including such conduct towards his/her/its suppliers and/or government institutions and has endangered his/her/its own reputation and/or the reputation of HBOR through such conduct. The client that meets two or more criteria for the assessment of increased risk also poses a high risk.

6. INCREASED RISK

Client poses an increased risk if a negative public perception has been established on the basis of public suspicions that criminal offences or other omissions stated above have been committed or made.

There is an increased risk of the client in case there is a justified suspicion or knowledge of the client’s connection with members of HBOR’s decision-making body on the basis of personal or interest association and the client, for whom there is a public perception of involvement in non-transparent business relations, close relations with political structures, close interest or personal connection with persons convicted of criminal offences stated above and knowledge of the connection with natural or legal persons against whom court proceedings are being conducted before the competent authorities and who, for that reason and because of such connection, are under extremely negative public perception.

7. Impact of risk categories on business relationship:

• Above-average high risk indicates to non-neligibility of an individual client, and the request for the establishment of a business relationship is suspended,

• High risk (that is advisable to avoid), but can be assumed in exceptional cases subject to approval of request for the establishment of a direct business relationship which shall include an assessment of high reputational risk (as defined by this Ordinance), by HBOR’s body in charge of making decisions on an individual business relationship,

• Increased risk (eligible subject to increased awareness of the existence of risk) in case of approval of the request for the establishment of a business relationship, which includes an assessment of increased reputational risk (as defined by this Ordinance), by  HBOR’s body in charge of making decision on an individual business relationship.

8. Statement on Client’s Eligibility

For the assessment of above-average reputational risk, among other, information obtained on the basis of the Statement on Client’s Eligibility are used, which must be submitted to the client for signature with the request or is a constituent part of the request for a direct business relationship. In certain cases set forth in the Statement, the client may give an additional explanation of its actions, based on which he/she/it provides evidence of his/her/its reliability in relation to the existence of certain criteria  for the assessment of above-average high risk.

9. Subsequent management of reputational risk

The Ordinance regulates also the subsequent management of reputational risk. Should subsequently HBOR’s exposure to reputational risk be established through the process of annual monitoring of client or should new facts or circumstances arise or an unfavourable public opinion about the client occur, in such case, the consequence may be the termination of business relationship.