Corruption is the use of public, civic resources for private benefit. The term is mainly tied with misuse of function and powers. Corruption in public administration, state institutions and bodies, and state-owned and public companies, is one of Croatia’s greatest challenges. It threatens the functioning of the market, economic growth, decreases tax revenues, negatively affects the national budget, and creates insecurity and loss of confidence in state institutions. These factors diminish the investment potential in Croatia and impact the international reputation of the Republic of Croatia and its activities on the international market.

Corruption has an indirect negative effect on national security as well; thus SOA has taken on the role, in cooperation with other competent bodies, of providing a support mechanism in its prevention and eradication.

The most frequent forms of corruption in the Republic of Croatia are linked to public tenders, public procurement, negotiation of direct business deals, and the issuing of various types of permits and approvals.

Complex corruptive practices have an international dimension. Elaborate international transactions are devised to obscure the trail of money gained through criminal activities and corruption. Almost all forms of economic crime are tightly associated with corruption.

Illegally acquired money is frequently laundered through investments into domestic economy and infrastructure. These practices undermine the credibility and national security of the Republic of Croatia. Off shore companies abroad are used for money laundering, and other criminal acts such as tax and customs evasion. Although off shore companies are not necessary illegal, they are often used to conceal the true source and the actual owners of the funds. These methods of money laundering and tax evasion complicate attempts to trace the trail of money. Such attempts require intensive international cooperation. Similarly, there are frequent cases of illegal extraction of money from legal entities.

Due to the large sums involved, which underscore the importance of the public sector in the national economy, public procurement processes are particularly vulnerable to corruptive activities and attempts to illegally “pull out” money by non-transparent, fraudulent and illegal means, to the detriment of the national budget.